Journal of Consumer Research, Inc.

Journal of Consumer Research, Inc.

Opportunity Cost Consideration Author(s): Stephen A. Spiller Reviewed work(s): Source: Journal of Consumer Research, Vol. 38, No. 4 (December 2011), pp. 595-610 Published by: The University of Chicago Press Stable URL: . Accessed: 27/07/2012 18:23 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@. .

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Opportunity Cost Consideration

STEPHEN A. SPILLER

Normatively, consumers should incorporate opportunity costs into every decision they make, yet behavioral research suggests that consumers consider them rarely, if at all. This research addresses when consumers consider opportunity costs, who considers opportunity costs, which opportunity costs spontaneously spring to mind, and what the consequences of considering opportunity costs are. Perceived constraints cue consumers to consider opportunity costs, and consumers high in propensity to plan consider opportunity costs even when not cued by immediate constraints. The specific alternatives retrieved and the likelihood of retrieval are functions of category structures in memory. For a given resource, some uses are more typical of the category of possible uses and so are more likely to be considered as opportunity costs. Consumers who consider opportunity costs are less likely to buy focal options than those who do not when opportunity costs are appealing, but no less likely when opportunity costs are unappealing.

C onsumers have unlimited wants but limited resources, so satisfying one want means not satisfying another (the opportunity cost). An opportunity cost is "the evaluation placed on the most highly valued of the rejected alternatives or opportunities" (Buchanan 2008) or "the loss of other alternatives when one alternative is chosen" (Oxford English Dictionary 2010). Opportunity costs are foundational to the science of economics and, normatively, consumers should account for opportunity costs in every decision. Though training can increase consideration (Larrick, Morgan, and Nisbett 1990), a stream of behavioral research concludes that individuals often neglect their opportunity costs (Becker, Ronen, and Sorter 1974; Frederick et al. 2009; Friedman and Neumann 1980; Jones et al. 1998; Langholtz et al. 2003; Legrenzi, Girotto, and Johnson-Laird 1993; Northcraft and Neale 1986). I define opportunity cost consideration as "considering alternative uses for one's resources when deciding whether to spend resources on a focal option." When do consumers consider opportunity costs? Who considers opportunity costs? Which opportunity costs do they consider?

Stephen A. Spiller (stephen.spiller@duke.edu) is a doctoral candidate in marketing at the Fuqua School of Business, Duke University. As of July 1, 2011, he will be assistant professor of marketing at the UCLA Anderson School of Management, 110 Westwood Plaza, Los Angeles, CA 90095. This article is based on the author's dissertation. The author thanks the editor, associate editor, three reviewers, and numerous seminar participants for constructive feedback. He is indebted to his dissertation committee, Jim Bettman, Rick Larrick, Beth Marsh, and especially his cochairs, John Lynch and Dan Ariely, for invaluable guidance and mentorship.

Ann McGill served as editor and Brian Ratchford served as associate editor for this article.

Electronically published April 14, 2011

What are the consequences of considering versus neglecting opportunity costs?

Five studies provide initial answers. Consumers consider opportunity costs when they perceive immediate resource constraints and when they use limited-use resources (i.e., resources that may only be spent on particular products); planners chronically consider opportunity costs even when they do not face immediate constraints. Categories of resource uses influence which opportunity costs are considered and the particular ones that are considered matter. Consumers who consider opportunity costs are more sensitive to their value than those who do not.

Opportunity cost consideration affects personal and societal well-being. Individuals who consider opportunity costs are more likely to obtain desirable life outcomes than those who neglect them (Larrick, Nisbett, and Morgan 1993). Personal bankruptcies are linked to credit card debt and spending on housing and automobiles that leave people with insufficient savings to withstand adverse events (Domowitz and Sartain 1999; Zhu, forthcoming). Controlling for demographics, propensity to plan for the use of money (possibly reflecting differences in opportunity cost consideration) is associated with higher FICO credit scores (Lynch et al. 2010).

I begin by discussing research on focal and outside options and propose how constraint and categorization may increase opportunity cost consideration. Five studies demonstrate the effects of constraint, planning, and resource-use accessibility.

FOCAL AND OUTSIDE OPTIONS

Consumers consider opportunity costs when they pay attention to outside options. Other constructs, such as pain of

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2011 by JOURNAL OF CONSUMER RESEARCH, Inc. Vol. 38 December 2011 All rights reserved. 0093-5301/2011/3804-0001$10.00. DOI: 10.1086/660045

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paying (Prelec and Loewenstein 1998; Rick, Cryder, and Loewenstein 2008) or the value of the marginal dollar (Chandukala et al. 2007), may curb consumption too but are not the focus of the present work. This usage of opportunity cost consideration is consistent with previous research (e.g., Jones et al. 1998; Legrenzi et al. 1993). Because the way consumers value money may be divorced from its possible uses (Hsee et al. 2003; van Osselaer, Alba, and Manchanda 2004), and therefore from opportunity costs, it is important to understand when they incorporate alternative resource uses, not just the value of money, into their decisions.

Previous research has largely ignored the drivers of opportunity cost consideration, although some has focused on the consequences of opportunity cost consideration versus neglect. Although framing one option as focal may not change the decision structure, and thus should not affect the decision, it can have important effects on choice (Jones et al. 1998). Appealing focal options are more likely to be chosen than appealing outside options (Posavac et al. 2004, 2005), more information is gathered about focal than outside options (Cherubini, Mazzocco, and Rumiati 2003; Del Missier, Ferrante, and Constantini 2007; Legrenzi et al. 1993), and sometimes purchase decisions are made as if outside options do not exist (Frederick et al. 2009). Research on hypothesis testing similarly finds that more evidence is gathered about focal hypotheses than alternative hypotheses (Klayman and Ha 1987; Sanbonmatsu et al. 1998), culminating in overconfidence regarding a focal hypothesis (McKenzie 1997, 1998). Although focal options take on a privileged status, consumers sometimes spontaneously recruit outside options into focal decisions (Jones et al. 1998; Posavac, Sanbonmatsu, and Fazio 1997). The purpose of the present work is to determine what drives such spontaneous recruitment of outside options. I propose two critical drivers are perceived constraint and the accessibility of alternate resource uses.

The Effect of Perceived Constraint on Opportunity Cost Consideration

The first proposed driver of opportunity cost consideration is perceived constraint. When consumers recruit inputs to evaluate a single alternative, they rely on a metacognitive sense of sufficiency to terminate search (Chaiken, Liberman, and Eagly 1989; Cohen and Reed 2006; Lynch, Marmorstein, and Weigold 1988). I posit that the laws governing the consideration of alternatives that are not part of the focal decision are similar to the laws governing the retrieval of inputs to evaluate a single alternative. For example, as outside options become more relevant to goal-based choices, they are more likely to be incorporated into consideration sets (Hauser and Wernerfelt 1990; Mitra and Lynch 1995; Roberts and Lattin 1991). Perceived constraint may increase the threshold for the sufficiency judgment, prompting consumers to ask themselves "What else should I consider?" and thereby increase opportunity cost consideration.

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H1: Resource constraints increase opportunity cost consideration.

In support of this hypothesis, tight mental budgets can reduce consumption (Heath and Soll 1996; Krishnamurthy and Prokopec 2010; Shefrin and Thaler 1988; Stilley, Inman, and Wakefield 2010), and merely making smaller, more constrained accounts more accessible leads to a lower likelihood of purchase (Morewedge, Holtzman, and Epley 2007). Russell et al. (1999) speculate that consumers with tight budget constraints are more likely to construct cross-category consideration sets. Consumers tend not to consider alternatives that are not explicitly available (Legrenzi et al. 1993), but they are more likely to consider alternatives when they are more relevant, even if they are not focal (Cherubini et al. 2003; Del Missier et al. 2007). Thought protocols show that people construe resource allocation tasks one decision at a time, effectively ignoring opportunity costs, until they have few resources remaining (Ball et al. 1998). When they approach constraints, other expenditure opportunities are more diagnostic, and they construe the current decision as an allocation across multiple expenditure opportunities.

Constraint is dynamic and varies over time; opportunity cost consideration should vary accordingly. Consumers using monthly budgets for any given purchase feel less constraint than consumers using weekly budgets (Morewedge et al. 2007), expenses are more salient at the end of budgetary periods than at the beginning (Soster 2010), and food consumption declines over the month for individuals receiving monthly food stamps (Shapiro 2005). Collectively, these findings suggest that shorter budgeting periods may increase opportunity cost consideration.

The Effects of Category Structures on the Accessibility of Opportunity Costs in Memory

The second proposed driver of opportunity cost consideration is the accessibility of alternate resource uses. Information in memory often is available without being accessible (Lynch and Srull 1982; Tulving and Pearlstone 1966), so increasing the accessibility of an alternative can increase its consideration (Mitra and Lynch 1995; Nedungadi 1990; Posavac et al. 1997; Priester et al. 2004). Accessibility is a function of both self-generated and externally present retrieval cues (Lynch and Srull 1982). The present work examines three important ways in which accessibility influences opportunity cost consideration.

Chronic Accessibility. Just like other concepts in memory, opportunity costs may be only situationally accessible for some individuals but chronically accessible for others (Bargh et al. 1986; Higgins, King, and Mavin 1982; Johar, Moreau, and Schwarz 2003; Markus 1977). Consumers with chronically accessible plans for the use of their money are likely to incorporate planned purchases into current decisions, much as listing ways one might spend $20 increases consideration of opportunity costs (Frederick et al. 2009). Propensity to plan is a domain-specific, traitlike construct

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reflecting generation and consideration of future plans (Lynch et al. 2010). Individual differences in propensity to plan reflect individual differences in frequency of plan formation, frequency and depth of subgoal planning, use of reminders and props to see the big picture, and preference to plan. Chronic planners are more likely than chronic nonplanners to consider opportunity costs (i.e., incorporate future resource uses into current decisions) when they are not constrained; when they are constrained, even nonplanners will consider them. In other words, chronic planning and constraint interact to affect opportunity cost consideration.

H2a: Nonplanners are less likely than planners to consider opportunity costs when they do not face immediate resource constraints, but nonplanners are as likely as planners to consider opportunity costs when they do face immediate resource constraints.

H2b: Resource constraints increase opportunity cost consideration for nonplanners, but resource constraints do not affect opportunity cost consideration for planners.

Resource-Use Typicality. Activation of a category concept (e.g., bird ) makes its typical instances (robin or sparrow) more accessible than its atypical instances (ostrich or penguin; Boush and Loken 1991; Hutchinson, Raman, and Mantrala 1994; Loftus 1973; Nedungadi and Hutchinson 1985; Rosch 1975; Rosch and Mervis 1975). Mental accounts and gift cards are associated with categories of purchases (Cheema and Soman 2006; Heath and Soll 1996; Henderson and Peterson 1992). Such categories are ad hoc or goal-derived categories (Barsalou 1983, 1985, 1987) that may include products from disparate product categories. For example, different sources of income are associated with different categories of possible expenditures, each of which includes resource uses that differ in typicality (Fogel 2009; Zelizer 1997). I conjecture that considering a focal purchase with one of these resources will activate more typical resource uses more than less typical resource uses. As a result of their greater accessibility, they are more likely to be considered as alternatives to the focal option.

H3: More typical uses of a resource are more likely to be considered as opportunity costs than less typical uses of a resource.

Resource-Use Limitations. Weber and Johnson (2006) argue that products do not readily come to mind when thinking of money because money is not associated with a meaningful category structure; it is tied to so many uses that it is not a good cue to any of those uses (Anderson 1974). Mental accounts are often organized around categories of purchases (Heath and Soll 1996; Zelizer 1997) or sources of income (Fogel 2009; Shefrin and Thaler 1988; Thaler 1985) and are types of categories themselves (Heath and

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Soll 1996; Henderson and Peterson 1992). Similarly, gift cards that are usable at different stores are limited in use to the categories of products available at those stores; these categories are usually not random collections but rather are often aligned with natural product categories. Any given item in a narrow category is generally a more typical instance of that category than it is of a broader category (Boush and Loken 1991), so narrow categories activate category instances more than broad categories (Alba and Chattopadhyay 1985; Boush and Loken 1991; Landauer and Meyer 1972; Meyvis and Janiszewski 2004). Resources that are associated with narrow categories of purchases activate alternative purchases, increasing the likelihood of consideration (Nedungadi 1990); such activation is less likely when categories are broad rather than narrow.

H4: Restricting the uses of a resource can increase consideration of opportunity costs while (weakly) decreasing the value of opportunity costs.

Consequences of Considering Opportunity Costs

Considering opportunity costs can, in general, reduce the likelihood of using a resource on some focal purchase. This can help rein in overspending, though sometimes it leads to underconsumption: when given a single free coupon, consumers may hold onto it too long because they wait for a better opportunity to use it (Shu 2008; see also Shu and Gneezy 2010).

Considering opportunity costs changes the key decision input from the absolute value of the focal option to the value of the focal option relative to the opportunity cost that is retrieved. Compared to people who fail to consider opportunity costs, those considering high-value opportunity costs will be less likely to purchase, whereas those considering low-value ones may not be (Frederick et al. 2009; Jones et al. 1998) or may even be more likely to purchase (Jones et al. 1998). The probability of making a purchase is inversely related to the value of the outside option only when that outside option is considered. Relative to opportunity cost neglect, opportunity cost consideration should be associated with a decreased probability of purchase when it is more valuable than the focal option, but an increased probability of purchase when it is less valuable. This effect is counter to the perspective of economic models that assume that the utility of money is used as a standard for all purchases, as they do not contemplate contextual effects on the outside good.

H5: Opportunity cost consideration increases sensitivity to the value of outside options.

In the remainder of the article, I provide evidence for these hypotheses in five studies. I begin by providing evidence for the role of constraint (studies 1, 2, and 3), emphasizing the role of pay cycle (studies 1 and 2) and constraint's interaction with dispositional planning (studies 2 and 3). Finally, I discuss the role of resource-use limitations

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and accessibility (studies 4 and 5). Table 1 summarizes the hypotheses and specifies the study in which each is tested.

STUDY 1: MONTHLY VERSUS WEEKLY BUDGETS AND SEQUENTIAL SHOPPING

Study 1 demonstrates the effect of constraint on opportunity cost consideration (hypothesis 1) and the relationship between opportunity cost consideration and sensitivity to the value of outside options (hypothesis 5). The paradigm in this study captures the essence of everyday consumer choices: consumers encounter a sequence of products that are individually affordable but collectively unaffordable, requiring them to make trade-offs across products over time. Constraint is operationalized holding total income constant by manipulating pay cycle (weekly vs. monthly). Those paid monthly and weekly have identical global constraints but face different real and perceived momentary constraints. In line with previous work on opportunity cost consideration (Cherubini et al. 2003; Del Missier et al. 2007; Legrenzi et al. 1993), I assess opportunity cost consideration as information search about other ways one could spend resources.

Method

Participants and Design. Students (N p 85) participated in the lab for a small payment; the entire study took place during a single session. The task was incentive-compatible: participants had a chance to win their set of chosen products. All participants completed a Daily Shopping task and a Budget Allocation task. In the Daily Shopping task, participants were given a budget and a sequence of 20 purchase opportunities (one per simulated day, 5 days per week, for 4 weeks). Before deciding to buy or not buy, participants could consider each of the next 3 days' offers. Money spent one day was not available to be spent on future days, so future opportunities were potential opportunity costs; revealing them indicated opportunity cost consideration. To manipulate constraint, participants were assigned to one of two Budget Frame conditions: Weekly (paid $20 per week, resulting in more constraint) or Monthly (paid $80 per month, resulting in less constraint). Consideration was an-

alyzed as a function of Budget Frame and Week (measured within subject: 1, 2, 3, 4). In the Budget Allocation task, participants were given their full $80 budget and faced with the choice of the same 20 products simultaneously. Because participants had full information and all decisions could be made jointly during the Budget Allocation task, these purchases were used as a measure of full information preferences; these allocations did not vary by condition.

Materials and Procedure. Participants had the opportunity to buy products from the University Store using store credit granted by the experimenter. One participant, selected at random, received his or her chosen products. Unused store credit was forfeited: all opportunity costs were within the experiment. Participants were shown the full set of 20 products in the instructions and told that prices ranged from $5.95 to $18.95; as in everyday consumer decisions, participants knew the range of prices they would encounter without knowing exact prices.

Participants with weekly budgets received $20 in store credit each "Monday" (i.e., on trials 1, 6, 11, and 16). Those with monthly budgets received $80 in store credit the first Monday (i.e., on trial 1). Any money not spent one week carried over to the next. Each day, participants saw the day of the week, the week of the month, their current balance, the current product offer, its price (which was the real product price), and "buy" and "do not buy" buttons. The "buy" button was inactive if the price was greater than the current balance. To the right of the current offer were three blank boxes representing the next three days' offers, each box accompanied by a button. By clicking the button 20 times, participants could reveal that day's offer and price. This instantiated a small effort cost akin to search or thinking costs required in everyday consumer environments.

After completing the Daily Shopping task, participants completed the Budget Allocation task. Participants were shown all 20 products with prices on the same screen and chose which products they would purchase. They could choose any subset they liked as long as the total cost did not exceed their total budget of $80.

Variables. All computations and analyses are based on affordable trials (i.e., trials on which the price did not exceed

TABLE 1 SUMMARY OF HYPOTHESES AND STUDIES IN WHICH THEY ARE TESTED

Hypothesis

H1: Resource constraints increase opportunity cost consideration. H2a: Nonplanners are less likely than planners to consider opportunity costs when they do not face imme-

diate resource constraints, but nonplanners are as likely as planners to consider opportunity costs when they do face immediate resource constraints. H2b: Resource constraints increase opportunity cost consideration for nonplanners, but resource constraints do not affect opportunity cost consideration for planners. H3: More typical uses of a resource are more likely to be considered as opportunity costs than less typical uses of a resource. H4: Restricting the uses of a resource can increase consideration of opportunity costs while (weakly) decreasing the value of opportunity costs. H5: Opportunity cost consideration increases sensitivity to the value of outside options.

Study 1, 2, 3

2, 3 2, 3

4 5 1, 3

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the balance). Budget Frame is the constraint manipulation (Weekly vs. Monthly). Consideration of opportunity costs is assessed as the proportion of future opportunities considered. Average Constraint (a proxy for perceived constraint) was calculated as (1/balance) averaged over the first 19 days; no opportunity costs could be considered on the last day. Budget Task Choice is the binary purchase decision during the Budget Allocation task. Product Appeal is the proportion of all participants choosing a given product in the Budget Allocation task when all products were simultaneously available. Opportunity Cost Appeal on any given trial is the average Product Appeal of the next three products for that respondent. Allocation Quality is the number of dollars spent during the Daily Purchase task on products that were also purchased in the Budget Allocation task (i.e., the number of products purchased in both tasks, each weighted by price); this variable is based on all trials.

Results

Consideration. In support of hypothesis 1, participants with weekly budgets looked ahead more frequently (M p .26, SD p .19) than did participants with monthly budgets (M p .18; SD p .14; t(83) p 2.20, p p .03). This provides direct evidence that constraint increases opportunity cost consideration.

Mediation of Consideration by Average Constraint. Average Constraint fully mediated the effect of Budget Frame on Consideration. Average Constraint was lower in the Monthly condition (M p .023, SD p .006) than in the Weekly condition (M p .045, SD p .011; t(83) p 11.19, p ! .01). Preacher and Hayes's (2008) SPSS macro with 5,000 bootstrapped samples revealed indirect-only mediation (Zhao, Lynch, and Chen 2010): controlling for Budget Frame, Average Constraint was positively associated with Consideration (B p 7.65; t(82) p 3.90, p ! .01). Controlling for Average Constraint, the direct effect of Budget Frame (Monthly p 0, Weekly p 1) on Consideration was not significant (B p .08; t(82) p 1.52, p p .13). The indirect path (B p .16) had a 95% confidence interval that did not include 0 (.06, .27).

Consideration over Time. If constraint drives opportunity cost consideration and constraint varies over time, opportunity cost consideration should vary over time too. In the last week, participants with monthly budgets faced similar constraints as participants with weekly budgets and so should similarly have considered their opportunity costs. Consideration per week was analyzed using a mixed ANOVA with Week (1, 2, 3, 4) as a within-subject measure and Budget Frame (Weekly, Monthly) as a between-subject measure. Data from the preceding week were used to fill in missing data for participants from the Monthly condition who had no affordable trials in weeks 3 (one participant) or 4 (seven participants). On these trials, the products were unaffordable, so the participants had no choices and thus no opportunity costs to consider. Note that this makes the test

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more conservative: I predict Consideration in the Monthly condition will increase more than Consideration in the Weekly condition, but using preceding weeks to fill missing data for the Monthly condition reduces the change in the Monthly condition without affecting the Weekly condition.

Week and Budget Frame interacted to affect Consideration (F(3, 249) p 2.71, p ! .05). In the first 3 weeks, participants with weekly budgets were more likely to consider opportunity costs (M1 p .35, SD1 p .28; M2 p .27, SD2 p .26; M3 p .24, SD3 p .23) than participants with monthly budgets (M1 p .25, SD1 p .23; M2 p .13, SD2 p .12; M3 p .15, SD3 p .18; F(1, 198) p 13.66, p ! .01), and this effect did not vary across Week (F(2, 249) p .48, NS). In the fourth and final week, participants with monthly budgets (M4 p .23, SD4 p .30) considered their opportunity costs just as much as those with weekly budgets (M4 p .23, SD4 p .21; F(1, 198) p .01, NS). Excluding week 1 (a period during which consideration was elevated across both groups due to exploratory behavior), the change from weeks 2 and 3 (which did not differ; F(1, 249) p .96, NS) to week 4 was greater for monthly than weekly participants (F(1, 249) p 6.46, p ! .01). Consideration increased among participants with monthly budgets (F(1, 249) p 7.75, p ! .01); there was no change among those with weekly budgets (F(1, 249) p .64, NS; see fig. 1). This effect of Budget Frame on the change in Consideration across Week was fully mediated by the change in Average Constraint across Week (see the appendix for details).

Sensitivity to Opportunity Cost Value. When opportunity costs are valuable, incorporating them into one's decision reduces the likelihood of purchase, but when opportunity costs are not valuable, incorporating them into one's decision can lead to an increased likelihood of purchase (hypothesis 5). Indeed, Consideration and Opportunity Cost Appeal interacted to affect purchase likelihood (B p 4.47; z p 2.49, p p .01), so spotlight analysis was used to consider simple effects of each factor at high and low levels of the other (Cohen et al. 2003; Fitzsimons 2008; Irwin and McClelland 2001). Unsurprisingly, when no options were considered, (unobserved) Opportunity Cost Appeal of the next three options was unassociated with likelihood of purchase (B p .35; z p .49, NS). When all three options were considered, Opportunity Cost Appeal was negatively associated with likelihood of purchase (B p 4.83; z p 2.81, p ! .01). When upcoming opportunity costs were the three most appealing options of the 20, Consideration was marginally negatively associated with likelihood of purchase (B p 1.08; z p 1.72, p p .09). When upcoming opportunity costs were the three least appealing options of the 20, Consideration was positively associated with likelihood of purchase (B p 1.42; z p 3.12, p ! .01). Moreover, Consideration was positively associated with Allocation Quality. See the appendix for details on these analyses.

To summarize, study 1 demonstrated that weekly budgets result in greater opportunity cost consideration than monthly budgets and that this effect is driven by resource constraints. The difference between less constrained and more con-

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FIGURE 1 STUDY 1: OPPORTUNITY COST CONSIDERATION AS A FUNCTION OF BUDGET FRAME AND WEEK

NOTE.--Week 1 consideration is elevated in comparison to other weeks, presumably because of extra exploration early in the study. Importantly, the effect of budget frame is consistent across weeks 1?3, and the interaction is driven by increased consideration in week 4 by participants with monthly budgets.

strained consumers is eliminated as consumers approach the end of their budgets because less constrained consumers (those paid monthly) face increasing constraint. Individuals who consider their opportunity costs are more sensitive to the value of their future alternatives than those who do not consider their opportunity costs, so opportunity cost consideration leads to a lower likelihood of purchase when future alternatives are appealing, but a higher likelihood of purchase when future alternatives are unappealing. Consideration leads to greater choice consistency with full information decisions.

STUDY 2: PAY CYCLES AND PLANNING

Study 1 demonstrated the effect of perceived constraint, operationalized by pay cycle, on opportunity cost consideration, operationalized by information search. Study 2 builds on these results in three ways. First, it uses a different operationalization of opportunity cost consideration. Second, it shows that these results hold when considering adult consumers facing real differences in pay cycle. Third, it demonstrates that greater propensity to plan is associated with greater opportunity cost consideration only among consumers not facing immediate constraints (hypothesis 2a) and that greater constraint is associated with greater opportunity cost consideration only among consumers with low propensities to plan (hypothesis 2b).

Method

Users of a popular tax-preparation software program were recruited via e-mail to participate in an online survey on household financial management; 454 consented to participate, 271 completed the study. The primary variables of interest for the present analyses, described in detail below, were designed to assess how opportunity cost consideration varied as a function of constraint (operationalized as pay cycle as in study 1) and propensity to plan.

Respondents completed a three-item scale of opportunity cost consideration: "I often think about the fact that spending money on one purchase now means not spending money on some other purchase later"; "When I'm faced with an opportunity to make a purchase, I try to imagine things in other categories I might spend that money on"; and "I often consider other specific items that I would not be able to buy if I made a particular purchase." Each item used a 1 (strongly disagree) to 6 (strongly agree) response scale. Consideration was assessed as the mean response across the three items (a p .85).

To assess individual differences in propensity to plan, respondents reported their propensity to plan for the longrun use of money (1?2 years) using the six-item scale from Lynch et al. (2010; e.g., "I set financial goals for the next 1?2 years for what I want to achieve with my money"). Each item used a 1 (strongly disagree) to 6 (strongly agree) response scale; Propensity to Plan was assessed as the mean response across the six items (a p .93). This scale demonstrated discriminant validity from the opportunity cost

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FIGURE 2 STUDY 2: OPPORTUNITY COST CONSIDERATION AS A FUNCTION OF PAY CYCLE AND PROPENSITY TO PLAN

consideration measure: the nine items yielded two factors, all own-loadings were greater than .80, all cross loadings were lower than .20, and the two measures were correlated at r p .20. To assess constraint, respondents reported how often they are paid (once per day, once per week, once every other week, once per month, less than once per month, irregularly, other, prefer not to answer). Because this scale was ordinal, participants were divided into short pay cycle (once per day; once per week; once every other week) and long pay cycle (monthly, less than monthly, irregularly) groups; analyses focusing on biweekly and monthly pay cycles (the two most common responses) and using number of weeks between paydays among weekly, biweekly, and monthly pay cycles were generally consistent. Participants with complete data including pay cycle (i.e., did not respond "other" or "prefer not to answer") are included in the analysis below (N p 242). Income was not related to pay cycle (p 1 .4), but all analyses are consistent when income is used as a covariate.

Results

Consideration was regressed on Pay Cycle (Short p 1, Long p 1), standardized Propensity to Plan (raw M p 4.26, SD p 1.11), and their interaction. The interaction was significant (B p .25; F(1, 238) p 8.53, p ! .01). In support of hypothesis 2a, the association between planning and consideration was positive and significant for respondents with long pay cycles (B p .59; F(1, 238) p 18.15, p ! .01), but it was trivial and nonsignificant for those with short pay cycles (B p .09; F(1, 238) p 0.84, NS).

To assess the effect of Pay Cycle for planners and nonplanners (hypothesis 2b), I used spotlight analysis to examine the effects of Pay Cycle at one standard deviation

above and below the mean Propensity to Plan. Nonplanners with short pay cycles reported considering opportunity costs more than those with long pay cycles (B p .45; F(1, 238) p 13.94, p ! .01). Planners with short pay cycles reported considering opportunity costs as much as those with long pay cycles (B p .05; F(1, 238) p 0.18, NS; see fig. 2).

These results replicate the primary result from study 1 and extend them to demonstrate the role of dispositional planning. As in study 1, respondents with long pay cycles considered opportunity costs less than those with short pay cycles. Furthermore, this effect was exacerbated for nonplanners but eliminated for planners.

STUDY 3: SPONTANEOUS CONSIDERATION OF OPPORTUNITY COSTS

Frederick et al. (2009) propose that merely reminding consumers that opportunity costs exist might lead consumers to consider them. Though the paradigms used in studies 1 and 2 had many benefits, they conceivably could have cued participants to consider opportunity costs when they may not have otherwise. In study 3, I consider the effect of constraint on opportunity cost consideration (hypothesis 1) without any reminders. To consider opportunity costs, participants had to spontaneously retrieve them from memory. Moreover, I replicate the results of study 2 and show that planning increases consideration among consumers not facing immediate constraints (hypothesis 2a) and the effect of constraint on consideration is most pronounced among nonplanners (hypothesis 2b).

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